Mainfreight in China - Fitting into the jigsaw

Mainfreight's Don Braid says knowing the local culture and using local knowledge are key

Don Braid says Mainfreight has to be 'nimble' about its business in China. Photo / Natalie Slade

Mainfreight group managing director Don Braid emphasises China is important to the Kiwi firm as it builds itself towards becoming a major global logistics and freight company.

Its business in the region grew by more than 20 per cent during the past 12 months. A developing trend is the growing tendency for major Chinese businesses to invest in manufacturing plants in Mexico - to tap into the (even) cheaper labour costs, as Chinese wage costs grow. Though that won't put a spoke in Mainfreight's China business, the firm has to be nimble.

"It means the Chinese have to think about where they put their next manufacturing plant," says Braid. "So that changes the face of logistics, it changes the face of shipping. Instead of shipping across the Pacific, we might move goods internally across America from Mexico.

"But there is still a lot being manufactured in China. There are still plenty of opportunities, particularly as the Chinese society develops - we are involved in both exports and imports."

Braid concedes that fierce competition for good quality people is an issue for Mainfreight in fast-growing markets including China. "Rivals sometimes offer our staff triple the salary we are paying them."

Staffing issues aside, the firm is punching well above its weight on the international stage with 75 per cent of its projected $1.90-$1.95 billion for the March 31 year coming from its offshore operations. "That freight doesn't even touch New Zealand, that's us doing work off- shore... we are developing a global business."

Mainfreight has not spread itself thin. "We could have taken the decision and not gone to Australia 20 years ago. But we took the risk to go and cut our teeth there, and have continued to grow ever since."

"We are a minor player. But we have expanded to complete the import-export triangle."

The triangle links Europe, the Americas, and Asia. Mainfreight has been in China for 10 years and has operations in cities like Ningbo, Shanghai, Shenzen and Hong Kong. Braid has signalled Mainfreight may buy a Chinese firm at some stage to spur growth. But he cautions, "We have to be very careful about what we acquire in China. Whatever we buy has to fit in - it has to be a piece of the jigsaw - so until the right opportunity comes along we are developing our core business."

He emphasises a key aspect to making headway abroad is to respect the culture of every country it operates in.

"Some firms enter a new market and say 'this is the way we do it' ... and in places such as China that just won't work.

"We look at each culture, understand it, and work with it - as opposed to fighting it. We spent years in China learning how to work there, learning our craft and how to work with the Chinese."

All this experience translates into some pretty simple advice for firms keen to do business abroad - work with, and hire, the locals.

"For example, when we went to Australia, we had to do it with a Mainfreight Australian culture, and that taught us to have a Mainfreight Asian culture," says Braid.

"It's all about the internationalisation of New Zealand companies. We have to become good at being able to understand how cultures operate, and how business cultures operate in each country."

Braid says now and again Mainfreight will hit a roadblock put up by corrupt officials in developing markets wanting their cut. Industry slang refers to "white, grey and black" lines. As you'd expect, the company only follows the so-called white line, where paperwork is beyond reproach, goods are cleared correctly through customs, and bureaucracies carefully navigated so everything is above board.

Braid says it's an easy slope from white to grey, and then you're just a hop, skip and jump to the black lane - where pay-offs are made under the table to ease goods through the system.

"You can imagine the pressure that comes from exporters trying to get their goods into a country, or importers trying to get their goods [once they are on the dock]," says Braid.

"Organised crime and dodgy government employees are involved - and we refuse to go there. We have a policy of anti-corruption, white lane only.

"It's the people controlling the border that are the problem, that's where the greed lies. But the importers and exporters have got the pressures to get their goods to market. And this causes some clients to not use us again - so be it."

Braid is at pains to point out that the country of Mainfreight's birth is almost inconsequential to its global ambitions, although being a New Zealand-based firm doesn't hurt when it comes to marketing.

"It means we are seen as being neutral, we haven't invaded any countries or started any wars," he says. "We are not seen as a threat and we can do a deal."

Braid's rule "Choose your local partners carefully, maintain a presence in the country and be careful with your brand".